Streaming entertainment is booming and the next growth frontier in that space is cloud gaming, a theme few ETFs are adequately levered to. The ARK Web x.0 ETF (NYSEArca: ARKW) has that exposure.
ARKW components “are focused on and expected to benefit from shifting the bases of technology infrastructure to the cloud, enabling mobile, new and local services, such as companies that rely on or benefit from the increased use of shared technology, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media,” according to ARK Invest.
What makes ARKW a more compelling option than passively managed funds is that with the benefit of active management, the fund goes beyond prosaic fares, such as Alphabet, Amazon, and Facebook. For example, Tesla is ARKW’s top holding, and the fund features exposure to the likes of Square and Roku, stocks not often found for size in traditional internet ETFs. Roku is another streaming name as the leader in the OTT space.
“Streaming games on the cloud is similar to streaming a movie on Netflix, but with cloud gaming, the user is in control. For example, when streaming a movie on Netflix, the user has zero influence on what happens in a scene, but with cloud gaming, the user’s inputs guide every stage of the game,” according to IHS Markit research.
Dreaming of Streaming
It’s no secret anymore that gaming, or esports, is big business and that trend should continue in 2020. That said, investors should keep gaming-focused ETFs on their watch lists for the new year. Importantly, video game equities have a reputation for performing well after the past instances of virus situations comparable to COVID-19.
As an industry, streaming is still in its formative stages and is on the cusp of potentially exponential growth over the next several years. ARK notes that content matters, but quality often does not while pointing out that no one can compete with Netflix in terms of matching viewers to the content they desire.
“In effect, gamers send commands from a mobile device to platforms like Stadia or xCloud or Steam’s Remote Play by, say, pressing a button or entering a series of keyboard commands,” notes IHS Markit. “The cloud server receives and executes those commands and then streams the results back to the gamer. If your speeds and latency are strong enough, gameplay happens in effectively real-time and without any delays or problems.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.